“This is a problem because higher productivity pays for higher wages and underpins a rising standard of living.”
When we talk about economic growth, the number that matters is per capita GDP.
That’s what makes a difference in our day-to-day lives.
If per capita GDP is rising, we are becoming wealthier in real terms.
We are becoming more productive, generating more value from the same or lesser amount of resources.
If per capita GDP is declining but overall GDP is rising, that means we are simply expanding our population.
Sure, the economy is ‘bigger,’ but our own standard of living shrinks.
Declining per capita GDP is also closely tied to productivity growth.
Without strong productivity growth, per capita GDP will stagnate and even decline. That’s exactly what is happening in Canada.
And now, Bank of Canada Governor Tiff Macklem is warning that Canada’s productivity growth “has disappointed”:
“Canada has been very good at growing its economy by adding workers,” the governor said. “But productivity growth, by which I mean more output for the same amount of work, has disappointed. This is a problem because higher productivity pays for higher wages and underpins a rising standard of living.”
Macklem is being subtle – as usual – but he is making an important point.
Until Canada’s economy grows due to stronger productivity rather than huge immigration hikes, our standard of living won’t be improving anytime soon.
Spencer Fernando
Photo – YouTube
